Say It Right Presentation to IIA Granite State

Say It Right Presentation to IIA Granite State Chapter 9 May 2013 Phil Tarling Chairman of the Global IIA Board www. globaliia. org

Background to the Speaker Vice President, IA Centre of Excellence, Huawei Chairman - Global IIA Immediate Past President of the ECIIA (2010 -2011) Past President of the IIA UK and Ireland (2005 -06) Provided Capacity building in Internal Audit & PIFC since 1998 Worked in the UK, Estonia, Latvia. Lithuania, Poland, Hungary, Czech Republic, Kenya, South Africa, Romania, Macedonia, Croatia, Serbia, Kosovo and Turkey § Now responsible for developing internal audit capacity in a worldwide Chinese owned telecoms company § § § www. globaliia. org

Agenda Some Real Changes in the past decade New Communication The Internal Auditor –Communication & Understanding Internal Auditing in the 20 Teens Better Communication is the answer www. globaliia. org

Some real changes in the last decade www. globaliia. org

Some real changes The profession - founded in 1941 With Europe at war -and the rest of the world not far off www. globaliia. org

Some real changes… The profession – developing a new look in the two thousand tens www. globaliia. org

Some real changes… From Clipboard To Tablet www. globaliia. org

Some real changes… www. globaliia. org

Some real changes… The Auditor with a Tablet www. globaliia. org

Some real changes… July 2012 – China Takes Second spot from Japan www. globaliia. org

Some real changes… The BRICS announced the setting up of the bank, described as a "BRICS-led South development bank. " www. globaliia. org

But one thing everyone has… www. globaliia. org

The one common feature… New Communication www. globaliia. org

New Communication www. globaliia. org

New Communication… This new communication is INFLUENTIAL Egypt protests organised through Social Media www. globaliia. org

New Communication… This new communication BREAKS BARRIERS… Syria unrest shown to the world on You. Tube www. globaliia. org

New Communication… The IIA’s very own Audit. Channel. tv www. globaliia. org

New Communication… Social Media is being used for internal audit Professional Development and Enhancement In the first 6 months, Audit. Channel. tv had 3. 2 M hits Is anyone still saying that Social Media is not important? Our companies aren’t, nor is government www. globaliia. org

New Communication… The UK Prime Minister’s Web Site www. globaliia. org

New Communication… Communication will help us shape the future, not only in countries but within our companies www. globaliia. org Communication goes across cultures, as much in company cultures as externally Communication is now instant so we have to be ready for it

New Communication… Communication comes in all shapes and sizes Written The written word is still persuasive Verbal A discussion can lead to a decision Visual Watching can provide insight BUT they all rely upon being listened to www. globaliia. org

New Communication To be heard You have to have listeners And to know who your audience is You have to listen as well www. globaliia. org

Communication www. globaliia. org

The Internal Auditor Communication & Understanding www. globaliia. org

The Internal Auditor -Communication This is not new to Internal Auditors Communication has always been a soft skill that auditors have developed, through reporting style and listening But previously Internal Audit had a bad reputation. www. globaliia. org

The Internal Auditor & Communication… We have moved on Focussed on risk, Determined to suggest solutions, Not hiding behind independence, Avoiding the sidelines Involved in the organisation’s success or failure Internal Audit is now a key part of the business www. globaliia. org

The Internal Auditor & Communication… We need to make sure that we say: vnot only has an audience vnot only that people are listening But also that we SAY IT RIGHT www. globaliia. org

Internal Auditing in the 20 teens Getting to the Top Table www. globaliia. org

Getting to the Top Table Football managers often say that for the goalkeeper to miss a save, 10 other players must have missed it before him. This third line role likens internal audit to that of a goalkeeper in a football match. When the ball is lost in midfield (first line) and the defence (second line) fails to pick up the opposition’s attack, it is left to the goalkeeper (third line) to save the day. There is a reasonable expectation that internal audit will identify the weaknesses in both first and second lines and failure to do so may lead to significant loss to the organisation. 1 st line: Business Management 2 nd line: Risk Mgt / Compliance / Others 3 rd line: Risk Based Internal Audit External Audit and the Regulators are the Referee and Linesman www. globaliia. org

Getting to the Top Table DIRECTION Board of Directors/ Audit Committee Senior Management 1 st Line of Defence ASSURANCE 3 rd Line of Defence 2 nd Line of Defence Financial Control Ethics & Legal www. globaliia. org Regulators Enterprise Risk Management External Audit Quality Internal Audit Inspection RISKS CONTROL Internal Control COMPLIANCE Operational Management Security

Getting to the Top Table The third line of Defence provides the outlet to the Audit Committee and Board But the seat is not a vacant seat for the CAE to walk into The seat at the Top Table has to be earned www. globaliia. org

Scaling Greater Heights Business is Focused on Risks: Top 10 Business Risks in 2011 1. Regulation and Compliance 6. Cost cutting 2. Access to credit 7. Non-traditional entrants 3. Slow recovery or doubledip recession 8. Radical greening 4. Managing talent 9. Social acceptance and Corporate Social Responsibility 5. Emerging markets 10. Executing alliances and transactions Source: Ernst & Young Business Risk Report www. globaliia. org

Risk Based Internal Audit RBIA is not about identifying the Process Risk in the organisation Risk Based Internal Auditing (RBIA) is a methodology that links internal auditing to an organisation’s overall risk management framework. RBIA allows internal audit to provide assurance to the board that risk management processes are managing risks effectively, in relation to the risk appetite www. globaliia. org

Meeting Stakeholder Expectations: Are we Being Honest With Ourselves? “If surveyed today on how well internal auditing is meeting its needs and expectations, my audit committee/executive management would probably rate their overall satisfaction…” Audit Committee Executive Management Unacceptable 0. 0% 0. 4% Poor 0. 4% 1. 9% Acceptable 16. 1% 25. 9% Good 57. 6% 57. 8% Outstanding 25. 9% 14. 0% Source: Emerging Trends and Leading Practices Spring 2011, The Institute of Internal Auditors – Audit Executive Network www. globaliia. org

The View from the Other Side: 2010 • Internal Audit needs improvement • Improvement needs to be within 24 months • 74% • 96% 2011 • 80% • 70% Source: Ernst and Young Global Internal Audit Stakeholder Survey, November 2010 & January 2012 www. globaliia. org

Internal Audit should provide Insight Agree/Strongly Agree • Board Members • Executives • CAE • 86% • 89% • 90% Source: Internal Audit Research Foundation Survey, March 2012 www. globaliia. org

Internal Audit frequently delivers Insight Agree/Strongly Agree • Board Members • Executives • CAE • 61% • 38% • 66% Source: IIA Research Foundation Survey, March 2012 www. globaliia. org

My Internal Audit delivers Insight My Internal Audit • Board Members • Executives • CAE In general Internal Audit • 79% • 77% • 56% • 81% • 57% • 72% Source: IIA Research Foundation Survey, March 2012 www. globaliia. org

Provide Insight should come through linking IA through RBIA with Risk Management and Governance in the organisation Meet our Stakeholders’ expectations we need to ensure that we do what it is they want us to do Educate the Stakeholders in what we can do www. globaliia. org

Competence Ascending to the Level of A Trusted Advisor Capable but poorly aligned Compliance function Trusted advisor Engaged but not strategic Relationships www. globaliia. org

Communication is the answer www. globaliia. org

Communication is the answer We have to understand the messages Do we know the language? www. globaliia. org

Communication is the answer for IA CAEs need to : 1. Listen to what the Board are saying directly and through the Audit Committee 2. Listen to what the senior executives are saying 3. Understand what the messages are www. globaliia. org

Communication is the answer Messages are often coded www. globaliia. org

Communication is the answer for IA 4. Make sure that what you are saying is to the right people » Be careful of the “Reply All” button 5. Make sure that your communication is clear » Are your reports concise and in plain language » Is it what you want to say? www. globaliia. org

Communication is the answer for IA www. globaliia. org

Communication is the answer Use Simple Words www. globaliia. org

Communication is the answer 6. Get a name as the “Advisor” to the Board and Audit Committee; the “go to” person for business advice 7. Have regular informal interaction with the Audit Committee members and the Chairman 8. Go beyond just reporting audit results; be part of the business discussing business issues with senior Executives www. globaliia. org

Communication is the answer 9. 10. Regularly communicate to senior management and the board: – Emerging risks facing the enterprise – Systemic trends on risks and controls gleaned from audit results All the internal audit team need to be effective communicators www. globaliia. org

Thank you Phil Tarling Office: +441189208506 Mobile: +447802656986 Email: phil. tarling@huawei. com Twitter: @philtarling www. globaliia. org